The former bottling plant in the Abell neighborhood has been all but abandoned for years. The Beverage Capital Corp. sign outside has faded. The white office walls have yellowed. A nearby mechanic uses the space that used to hold the bottling line as a parking lot.

But when J. Hollis Albert tours the cavernous 48,000-square-foot facility, he imagines new life inside — brewers tinkering with formulas, bubbling fermentation tanks, beer bottles being filled and capped.

Albert and Stephen Demczuk, owner of microbrewery Baltimore-Washington Beer Works, are in the final stages of opening Peabody Heights Brewery, which would be the city's first large-scale brewery in more than 30 years. The two men, partnered with a Chicago restaurateur, have leased the building, bought equipment from a Canadian brewery and will produce the partners' beers and others on contract.

"There used to be hundreds of little breweries all over Baltimore. When I was a kid, you could go through National Brewing and take a tour. You knew what it was. It was personal," Albert said. "What I like about this place is that it's in the neighborhood."

The project stems from growing interest in craft beers. Despite flat sales for mainstream lagers, demand for craft beers has exploded in recent years, leading to a surge in brewery openings, including several in Maryland.

Scheduled to begin within the next two months, Peabody's brewhouse could produce as many as 40,000 barrels a year of at least 10 different beers, say its owners, who aren't disclosing financial details about the venture. Yet success can be elusive in this beer-making business — more than 10 microbreweries have closed each year during the past two years, according to an industry group — and Peabody can expect a sobering first several years.

Peabody is the latest development to move Baltimore closer to its brewing past. National Bohemian flows from some city bars' taps again and National Premium is returning this month for the first time in over a decade, though both are brewed out of state.

The city's reputation as a beer town stretches back to the late 19th century, when it had as many as 40 breweries, said Maureen O'Prey, who wrote the book "Brewing in Baltimore" on the subject.

"It's part of our roots," she said.

National recognition came in the 1960s for brands produced by Gunther, American Brewery and the National Brewing Co.

But enthusiasm for local beers fizzled out by the late 1970s, as competition from the national brands of brewing conglomerates — Budweiser, Miller, Coors — overwhelmed the locals. One by one, the Baltimore breweries and bottling plants closed, starting in 1973 with American's landmark red-brick plant on Gay Street.

Peabody is the first large-scale brewery slated to open in the city since then, though several brewpubs —all with annual production of fewer than 5,000 barrels — popped up in the city during the first craft beer boom in the 1990s. That interest recently has been an upswing.

Craft beer sales reached record levels last year — 12.5 million barrels, up nearly 2 million barrels from the year before, according to industry newsletter Beer Marketer's Insights.

"It's very much a sweet spot for consumers right now," said Benj Steinman, president of the newsletter.

Some 200 breweries opened nationwide between 2009 and 2010, according to the industry group Brewers Association. In Maryland, two opened last year and five more, including Peabody, are in the process of opening.

Two of those five — in Hampstead and Ocean City — are waiting for the state comptroller to approve their brewing licenses, an agency spokeswoman said. Union Craft Brewery, in the works in the Woodberry section of North Baltimore, plans to release about 1,000 barrels in its first year after it starts brewing in May, said co-owner Jon Zerivitz.

Last year, Demczuk started revamping the old Haussner's restaurant in Highlandtown with an eye toward expanding the current 1,000-barrel annual production of Baltimore-Washington Beer Works' flagship beer, The Raven. The project fell apart in December, Demczuk said, because it required more money than he was willing to spend.

But Albert, an old acquaintance who had been working separately on a brewery, had found a site he shared with Demczuk: a former Canada Dry bottling plant sitting underused near Waverly Market.

The plant has been in an area zoned for light manufacturing — breweries require zoning for heavy manufacturing. That zoning issue thwarted Hugh Sisson, the owner of Heavy Seas Beer, from opening a brewery in the city. Sisson said he wanted to be in Baltimore for sentimental reasons, but chose Halethorpe instead because the only properties in the city available to him in 1996 were in industrial areas.

Albert resolved the zoning by winning the support of the Charles Village Civic Association, the Abell Improvement Association and City Councilwoman Mary Pat Clarke.

"This is a real plus for Waverly," Clarke says.

The city's zoning board granted a zoning variance in November, just before Demczuk's first plan unraveled.

The rest of the pieces fell into place quickly. In January, Albert agreed to buy all the equipment from a Canadian brewery, Surgenor Brewing Co. Ltd., which had put itself on the market for $2 million. Peabody Heights paid less — Albert wouldn't say how much — because it didn't buy Surgenor's building on Vancouver Island.

The deal includes assembly in Baltimore and a one-year consulting arrangement with the Canadian brewers. In the middle of this month, five truckloads of brewery equipment are scheduled to start making their way on ferries, trains and trucks to Baltimore.

Albert, Demczuk and Patrick Beille, the Chicago restaurateur, formally entered into the Peabody Heights Brewery partnership in February. Demczuk's Baltimore-Washington Beer Works owns 49 percent of the limited liability company. And in early March, Peabody Heights signed a lease with an option to buy the Abell bottling plant.

Albert, a 53-year-old with an eclectic resume — he's a former real estate agent and once was a co-owner of the Senator Theatre — speaks with an entrepreneur's bravado. He's confident in Peabody because the market is right for it, he said; financially, the project "could not be structured better," though he declined to go into details.

"If everyone was good at business, everyone would have their own business," he said. "I like taking something and creating something out of it. It's an art. Some work better than others."

For Demczuk, the partnership will allow him to triple annual production.

"This is what I've been looking to do for a long time," he said. "This is the only way to survive — to get out there, to get more brands in the market and keep creating interest."

In addition to The Raven, a European-style lager, Peabody plans to produce three other Edgar Allan Poe-themed beers for Demczuk, Surgenor's four labels and three formulas Beille owns. It also is negotiating to do other contract brewing. Peabody eventually could produce 40,000 barrels of beer a year, Demczuk said, starting with 6,000 in the first year.

After it opens, Peabody still faces major hurdles. A leased brewery with new equipment is looking at $1.5 million in startup costs at least, according to several industry experts. There's also the installation and testing of the equipment, cultivating a distribution system for an operation more ambitious than any of the principals have ever undertaken, and fine-tuning the brewing process, which can be as much art as science.

"The manufacturing process is very subtle," said Heavy Seas' Sisson. "It's gonna take time to understand your system and how your recipes adjust. Packaging is very difficult."

If it's botched, an entire batch can be a loss. "These are all steep learning curves," Sisson said.

Peabody also is going into production with just a handful of part-time workers, including the three principals. Two brewers from Surgenor have agreed to serve as consultants for a year, but they won't be in Baltimore full time.

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"In the early going, it'll be difficult to make much money," said Steinman of Beer Marketer's Insights.

One encouraging model is Heavy Seas, which opened in 1996 as Clipper City Brewing Co. Sisson was also confident when he started. He had been a brewpub owner for seven years and had $2 million in startup capital.

But just as his brewery opened, the craft beer market waned. "We were hand-to-mouth," he recalled. He survived because 75 percent of the brewery's production was for other companies, which minimized costs as he developed his own brands.

It took him two years to find a balance, he said, and 16 to get close to his brewery's capacity. Last year, he produced 31,000 barrels and is hoping to reach 40,000 this year.

"As far as I'm concerned, I'm still a student," he said. "This is something that can humble you on a day-to-day basis."